(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP04T00794R000100500001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: January 12, 2017
• Document Release Date: May 17, 2011
• Sequence Number: 1
• Publication Date: October 1, 1986
• Content Type: MEMO

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1 OCTOBER 1986
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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
1 October 1986
Mexico's Stance on Bilateral Commercial Negotiations
Summary
After a one-year hiatus, Mexican officials have committed themselves to returning
to the negotiating table to discuss a bilateral commercial agreement with the United
States that will provide a framework for trade and financial dealings, consultation and
dispute settlement procedures, and guidelines for investment. President de la Madrid
personally signaled his desire to seek a broad-based commercial agreement with the
United States last year by reversing a regulation detrimental to US pharmaceutical firms
that had obstructed bilateral talks.
opposition from interest groups, however, probably limit the scope of the
agreement the government will accept and will complicate the negotiations. On balance,
we believe that the Mexicans would be willing to agree to consultation and dispute
settlement procedures and to fold intellectual property rights into an agreement, but if
they are pressed on foreign investment, they are likely to..balk....
Introduction
After a year-long hiatus, Mexican officials have committed themselves to returning to
the negotiating table to discuss a bilateral commercial agreement with the United States
that will provide a framework for trade and financial dealings, consultation and dispute
settlement procedures, and guidelines for investment. Negotiations on the agreement will
touch on a broad range of specific trade and investment issues, including trade barriers on
agricultural and manufactured goods, intellectual property rights, and foreign investment
This memorandum was prepared byl (Mexico Branch, Middle
America-Caribbean Division, Office of African and Latin American Analysis, at the
request of Ann Hughes, Deputy Assistant Secretary for the Western Hemisphere at the
Department of Commerce. Questions and comments may be directed to the Chief,
Mexico Branch
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Mexico has made some headway in removing major trade irritants with the United
States in the last year. Most notably, the government signed a subsidies agreement calling
for the gradual elimination of illegal export subsidies, it backed away from tightening
restrictions on the operations of US pharmaceuticals, and it added a large number of
products to the list of imports exempt from permits. A number of problem areas remain,
however, the most difficult being regulations on patents and trademarks that have effectively
allowed Mexican firms to copy US products, restrictions on foreign investment, local content
requirements, and export performance requirements.
Giving Ground on Intellectual Property Rights
The government
also presented draft amendments on the inventions and trademarks law to the Mexican
Senate in mid-September. If enacted, these amendments would go far beyond de Ia
Madrid's 1985 decision to overturn a regulation prohibiting US drug firms from using brand
names and forcing them to disclose trade secrets.
In large measure, the revisions are primarily aimed at protecting pharmaceuticals and
biotechnology, but they also will cover other products, such as chemicals, previously
excluded from patent rights.
the proposal may provide only nominal protection
because of several loopholes. Compulsory licensing and injunctions are in fact very difficult
to obtain in Mexico. Moreover, ambiguous wording may allow "pirate" firms to interpret the
law to their advantage.
Dim Prospects for Changing Investment Laws
Mexican willingness to negotiate on intellectual
matched by a similar attitude on foreign investment.
while at least some government officials believe relaxing foreign investment
restrictions is critical to revitalizing Mexico's economy, the protectionist bent of key
members of the Cabinet--as well as of business and leftwing opposition--make significant
changes in foreign investment rules unlike) .
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In our opinion, a wariness towards foreign investment and a desire to prevent
multinationals from driving local firms out of the market are likely to remain the
underpinnings of Mexico's investment policy. Despite some steps taken two years ago to
chip away at administrative delays and to lower barriers on foreign investment in priority
sectors, the government has authorized only a handful of US investments with more than a
50 percent US share. Mexico also has recently allowed 100 percent Japanese ownership of
several plants. Nevertheless, we believe these moves are in line with previously-announced
policies to allow majority foreign ownership only in a limited number of sectors where the
Mexicans seek foreign technology, such as electronics and chemicals, and subject to
numerous constraints. At the same time, Mexico has imposed higher local content and
export performance requirements that hinder foreign investors. The government shows no
signs of permitting majority foreign ownership in other sectors, such as banking, insurance,
and brokerage, which are politically sensitive and where fledgling Mexican firms would have
difficulty competing with multinationals.
In some cases, the rules for what constitutes acceptable and unacceptable foreign
investments in electronics, for instance, overlap. Foreign investors, unsure of how the rules
will be applied, opt not to invest. If Mexico follows through, the regulations could at least
clear up uncertainties and contradictions in the government's policy..
Concessions Mexico May Seek
Mexico is almost certainly coming to the talks with the hope of making inroads into
the US market. The collapse of oil prices has prompted Mexico to strive to diversify and
increase non-petroleum exports, particularly to the United States, Mexico's most important
trading partner. Last year's subsidies agreement went part of the way towards achieving
this goal by obtaining a US commitment to assess whether US firms are injured by Mexican
exports before applying countervailing duties and anti-dumping margins. In exchange, the
Mexicans promised to phase out export subsidies.
Mexico City has moved further to encourage trade since the signing of the subsidies
agreement. It has eased import licensing restrictions, lowered tariffs, joined the GATT, and
drawn up a revised patent and trademarks law. These steps will markedly increase US
exporters' access to the Mexican market and improve protection afforded to US
manufacturers. Some will entail costs to Mexico because inefficient Mexican firms will find
it difficult to survive in a more open market. Mexican officials probably view these changes
as bargaining chips for extracting additional agreements from the United States, such as
promises not to impose new tariffs or non-tariff barriers, a rollback of US countervailing
duties on Mexican exports, and easier access for such Mexican goods as textiles, auto parts,
steel, meat, tuna, and sugar. Mexico may also want to recover some of the tariff
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Divisions within the Cabinet
Opposition to a wide-ranging bilateral agreement within the cabinet is likely to place
limitations on any agreement and may cause the Mexicans to drag their feet on negotiations.
Secretary of Commerce Hernandez advocates a framework agreement, but he probably will
have a harder time selling it than GATT membership or the subsidies agreement if it appears
that Mexico stands to gain little.
We believe that the Mexicans would be willing to
agree to consultation and dispute settlement procedures and to fold intellectual property
rights into an agreement, but if they are pressed on foreign investment, they probably will
stall the negotiations until the end of de la Madrid's term.
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Secret
Distribution:
Original - A. Hughes (Commerce)
1 - D/DCI-DDCI Executive Staff
1 - DDI
1 - O/DDI
1
- LA/NIO
1
- A.
Vila, Commerce
1
- M.
Coile, Commerce
1
- C.
Klein, USTR
1
- T.
Bennet, USTR
1
- N.
Lee, Treasury
1
- NI
C/AG
1
- PD
B Staff
1
- C/
DDI/PES
1
- DD
I/CPAS/ISS
1
- D/
ALA
1
- AL
A/PS
1
- AL
A/Research Director
1
- CP
AS/IMC/CB
1
- D/
OGI
1
- C/
SRD/OGI
1
- C/
PRB/OGI
1
- C/
MCD
3 - C/MX
1 - MX Files
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